Psychology and luck

[gremtp]

I was asked by Steve to re-post this message in a new thread. Here it is.

I would like to say something regarding psychology and luck, a thought prompted by looking at the equity curve chart that Chris Eddison posted in the forum on 4 Oct 07, post Nr. 1659 in the e-mini trading thread. I hope Chris does not mind.
By the way, Chris, it is very nice to see that you contribute to this forum again. Your posts were very helpful in my first period as a MTP user and it was sad to see your “posting strike”
So here it is. I hope someone will find it interesting.
Any curve that shows 257% growth on initial capital is great and deserves the deepest respect. Surely one does not care too much about the period between trade 180-ish and trade 250-ish, because he has a very good amount already in his pockets.
Easy….or is it?
Skilled and seasoned trader like Chris could do it easily.
But let’s imagine a new guy that started the “system” or methodology or whatever in…what was it, say July, at about trade number 180: he would have gone nowhere. That would be quite hard to stomach. I am not saying that losses should not happen or that traders should just be right all the time and all that stuff.. I am saying that 3 months where the only people who made money are your brokers (and MTP, but at least they are a nice bunch ) would require an almost religious trust in the system and in one’s trading abilities. More likely, it would cast all sorts of doubts about what one is doing wrong, whether he has misunderstood something . I have to admit that at this stage the Forum would not help very much, as the trades reported are usually (I am not saying exclusively!!) good examples. Everyone seems to be making money, except yourself. Here I also have to say that in this sense things are much more balanced on the forum now, thanks to scooper, TAR001, etc.)
Anyway, one starts thinking that people like Chris have a special way of filtering the trades, start pestering Chris, Steve and other experts for little snippets of the knowledge. Confidence slips and a negative circle develops.
Who has not been in this situation? I have been pretty much in it with MTP-RT last year and for many months. (Just for the records, I have never pestered you, Chris, or anyone else with PMs )

So we can talk about dominating the psychological aspect as much as we like, but there is also a huge amount of luck in adopting any system. If one started trading from trade 65 or 70, there would be no doubt. If one started on trade 180, even with all the expertise in mastering the MTP methodology, I would say, he would have moved on and looked for something else.
I can say that luckily (yeah) I decided to stay and look for ways to bring this methodology closer to my “trading style”. I have had to make a number of adjustments to be happier and more comfortable with MTP-RT.
I have to thank a number of people in this forum for their contributions. Knowingly, and mostly unknowingly, they helped me a great deal.
Good trading

[gremtp]

So I also post my reply to Chris here, I guess. Here it is.

Hi Chris and thank you for the clarification. I am sorry that I misunderstood the chart, but I could not have known…. Besides, I did not mean to dissect your equity curve.:D
I took your chart as an example, and, although misrepresented, I still think that the point is valid. It has happened to me, and it was long after I had learnt not to “fight the market into submission”.
The fact is 70 trades are 70 trades. Going nowhere. And I think what I said still stands, with any system. I have tested many systems (more or less mechanical) and I have discarded many that led me nowhere after a decent sample. Maybe, had I tested the same systems at another time, I would have used them and maybe I would have made a good pot of money, so when they did not work so well I could still stand comfortable.
If you are lucky enough to start trading at trade 65, you think you have found the Holy Grail, so to speak. If you started trading at trade 37, by the time you are at trade 65 you need rock solid faith to keep going.
My other point is that if one likes a concept, it is usually a good thing to persevere and try to adapt it t one’s style of trading. As I said, it was by looking at people like you and few others that I kept going. I like the MTP concept, but I have never managed to master it with the standard guidelines. I am glad that standard set ups work for you. It has never work for me, so from this point of view I may still be doing something wrong. But I use MTP-RT with a number of other adjustments and filters and I am much happier.
I hope this also clarifies. Thanks again

[Eddo]

I do understand the point your making and if you had 70 trades that went nowhere then I can certainly understand your frustration but I do believe that if you are applying correct position sizing, then over 70 trades you would have to be increadibly unlucky to go nowhere.

Look at my trades from 187 to end Sept - I only got 42% winners, I had a run of I think 7 trades in a row which were lossers but I still increased my trading capital over that period by 19%

I really am a very simple man and to be honest many of the people who post on here are 100% more knowledgeable and certainly far more technical than I am but with the simple maths of correct position sizing and using a sensible degree of common sense regarding which trades to take and when to close them you really should be making good money

Good luck with it - and for what its worth I have yet to find anything which comes even close to producing worthwhile trades as those produced by MTP

Chris

[Steve Griffiths]

I was asked by Steve to re-post this message in a new thread. Here it is.

I would like to say something regarding psychology and luck, a thought prompted by looking at the equity curve chart that Chris Eddison posted in the forum on 4 Oct 07, post Nr. 1659 in the e-mini trading thread. I hope Chris does not mind.
By the way, Chris, it is very nice to see that you contribute to this forum again. Your posts were very helpful in my first period as a MTP user and it was sad to see your “posting strike”
So here it is. I hope someone will find it interesting.
Any curve that shows 257% growth on initial capital is great and deserves the deepest respect. Surely one does not care too much about the period between trade 180-ish and trade 250-ish, because he has a very good amount already in his pockets.
Easy….or is it?
Skilled and seasoned trader like Chris could do it easily.
But let’s imagine a new guy that started the “system” or methodology or whatever in…what was it, say July, at about trade number 180: he would have gone nowhere. That would be quite hard to stomach. I am not saying that losses should not happen or that traders should just be right all the time and all that stuff.. I am saying that 3 months where the only people who made money are your brokers (and MTP, but at least they are a nice bunch ) would require an almost religious trust in the system and in one’s trading abilities. More likely, it would cast all sorts of doubts about what one is doing wrong, whether he has misunderstood something . I have to admit that at this stage the Forum would not help very much, as the trades reported are usually (I am not saying exclusively!!) good examples. Everyone seems to be making money, except yourself. Here I also have to say that in this sense things are much more balanced on the forum now, thanks to scooper, TAR001, etc.)
Anyway, one starts thinking that people like Chris have a special way of filtering the trades, start pestering Chris, Steve and other experts for little snippets of the knowledge. Confidence slips and a negative circle develops.
Who has not been in this situation? I have been pretty much in it with MTP-RT last year and for many months. (Just for the records, I have never pestered you, Chris, or anyone else with PMs )

So we can talk about dominating the psychological aspect as much as we like, but there is also a huge amount of luck in adopting any system. If one started trading from trade 65 or 70, there would be no doubt. If one started on trade 180, even with all the expertise in mastering the MTP methodology, I would say, he would have moved on and looked for something else.
I can say that luckily (yeah) I decided to stay and look for ways to bring this methodology closer to my “trading style”. I have had to make a number of adjustments to be happier and more comfortable with MTP-RT.
I have to thank a number of people in this forum for their contributions. Knowingly, and mostly unknowingly, they helped me a great deal.
Good trading

Yep, a good post and one of the main parts that the vast majority of amateur and new traders simple do not understand.

Trading is NOT a salaried position where you take money form the markets regularly, it is lopsided. As you can see from Chris's results and indeed any successful trader (including me) you have periods when you don't make money. This is not the fault of the system, this is just how trading unfolds. So yes if you are "lucky" for want of a different word, then you start during a good phase, however, sometimes this does not happen.

So here is a good bit of advice to all new traders out there, yes you will have losses and yes you will have periods when your equity curve moves sideways, but if you stick with it and become experienced, then yes (over time) the profits can be there. But do not expect profits everyday or every weeks or every month, the markets simply do not unfold like that, so the sooner you learn the truth about how the markets unfold, the better you will be equipped to cope with them.

The reason many amateurs fail is they simple have no understanding of this and seem to expect money everyday. Ask any successful professional trader, and they will tell you this is not the case. We see far to many people here who simply return the software just because they do not immediately make money. Well, as you can see, this can be the case, so it is not the fault of the software, it is simply that the amateur new trader does not understand how profits and losses unfold over time. Ths is why (as a company) we much prefer talking to experienced traders who have seen (and understand) this. Most amateurs do not know, or even worse, do not believe us when we explain how the real trading world works....

Persionally, myself in my early days I worked 6 months forward, in other words I always had at least 6 months living costs and expenses in the bank, this allow me to get through the inevitable quiet times.

So a very good post and one that a lot of new traders can learn from........

Steve